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Eric Savitz, Forbes San Francisco bureau chief posted a very informative piece on the proposed Dell LBO that had been rumored for weeks and finally announced yesterday. The links he provides to documents Dell submitted to the SEC as part of its 8K filing are particularly interesting. Two key points he makes (in reverse order from that of his blog post) are:

Image via CrunchBase

Going private will buy the company time to fix itself without worrying about the impact on quarterly results and fluctuating share prices.

Repeatedly, the company makes the case (in the SEC filing) that the new debt required for the deal will not get in the way of the company doing deals to transform its business.

Here we have Dell saying that the whole point of the LBO is fixing itself and transforming its business. This blog post examines Dell’s storage strategy with those objectives in mind.

Through acquisition, Dell built up an arsenal of storage products and technologies from leading edge disk storage brands (Compellent and EqualLogic) to backup (AppAssure and Quest), archive (Exanet), and deduplication (Ocarina), spending billions along the way. In conversations with industry analysts throughout last year, Dell executives articulated the belief that it could be disruptive in storage by selling high-end enterprise level functionality at a lower price point to its core customer base of small/medium-sized enterprise buyers. As one Dell storage executive said: “It’s time we became a change agent. There is an opportunity for Dell to be disruptive.”

Dell has been buying its way to an expanding and evolving storage product portfolio as it migrated its customers off of previous generation Dell/EMC devices to the more modern Compellent and EqualLogic disk arrays. Many if not all of its storage product acquisitions are x86 compatible, giving Dell the ability to leverage its other x86-based products—bladed servers for example—giving Dell a competitive pricing advantage when proposing solutions that combine Dell hardware and software. Dell is also in a position to address all the major storage needs of its core customer base—primary application, data protection, and archival. The complete storage portfolio can now be presented as a continuum—from production to backup to archive, helping Dell to migrate current Dell/EMC users to an all-Dell solution wherever it may fall along that continuum.

Midway through 2012, the strategy was:

Apply the storage portfolio to Dell’s computing “stack” initiatives, converging storage with networking and servers including server blades into an integrated and cohesive unit presentable to enterprise customers.

Integrate the storage product portfolio “end to end” from primary to data protection to archival.

The big question now is, as the fixing and transforming process is applied to Dell storage, how will that impact strategy as well as Dell storage customers?

I’ve read a number of post LBO scenarios penned by other financial analysts suggesting that Microsoft could significantly influence Dell’s overall strategy going forward. After all, Microsoft is integral to the financing of the proposed buyout with a dominating $2B contribution. To understand how Microsoft’s influence might relate to storage, it’s worth noting a computing industry macro trend that’s been developing over the last few years.

It was once an unwritten rule of storage sales to never let hardware get in the way of a sale. Oracle broke that rule once and perhaps for all when it bought Sun Microsystems. Why? Let’s go back to the computing stack concept mentioned above that’s been evolving as well over the past few years. With the acquisition of Sun hardware, Oracle now offers them as in the very successful Exadata platform.

But more importantly for Microsoft, VMware is featured in a number of others that are currently available. These include the VCE VBlock from the confab of VMware, Cisco, and EMC, IBM’s PureSystems, and the NetApp /Cisco FlexPod. Here are some big names with big customer bases pushing VMware-based compute stacks forward. Where is Microsoft’s Hyper-V?

Under the proposed LBO, Microsoft doesn’t buy Dell outright, but does buy-in as an uber partner. Microsoft needs to gain market share in the virtualize operating system space. In fact, I believe boosting market share significantly for Hyper-V is an imperative for Microsoft to continue to remain relevant in virtualized operating systems. Therefore, I think it’s reasonable to expect to see significantly greater emphasis from Dell/Hyper-V-enabled and optimized compute stacks that compete head-on with the VMware stacks if this deal comes to fruition. Most if not all of Dell’s storage portfolio will likely be built into these Hyper-V-centric stacks that leverage Microsoft management apps as well. More emphasis on Hyper-V-optimized storage solutions could be expected as well.

Overall though, perhaps the operative expectation for the near term is no real change for Dell storage as a result of the LBO, save perhaps some layoffs and a restructuring of the storage group that was in the works before this announcement. Dell storage will continue to take on all mid-range enterprise storage competitors, including its former partner EMC.